Form ITR-BN Explained: CBDT Notification 97/2026 and the New Block Assessment Return for Search Cases
Quick Summary: CBDT Notification 97/2026 at a Glance
- What changed: CBDT has notified a dedicated return form, Form ITR-BN, for filing the return of income in block assessment cases arising from search and seizure action.
- The instrument: Notification No. 97/2026 dated 24 July 2026 [F. No. 370142/11/2026-TPL], notifying the Income-tax (Third Amendment) Rules, 2026, issued under Section 294 read with Section 533 of the Income-tax Act, 2025.
- The mechanism: Rule 332 of the Income-tax Rules, 2026 is amended to substitute the words “Appendix III” with “Appendix III and Appendix IV“, and a new Appendix IV is inserted containing Form ITR-BN.
- Who it applies to: Only where a search is initiated under Section 247 or a requisition is made under Section 248 of the Income-tax Act, 2025, on or after 1 April 2026. Searches before that date continue under the old regime.
- The number that matters: undisclosed income of the block period is charged at a flat 60 per cent, plus surcharge and a 4 per cent Health and Education Cess, with interest under Section 298. No slab, no basic exemption, no deduction relief.
What Is Form ITR-BN and Why Has CBDT Notified It Now?
If you advise a business that could ever be subject to a search, this is the form you need to know exists before you need it. On 24 July 2026 the Central Board of Direct Taxes issued Notification No. 97/2026, notifying the Income-tax (Third Amendment) Rules, 2026 and bringing into existence Form ITR-BN, the Income-tax Return for Block Assessment for Search and Seizure cases.
The reason it arrives now is structural rather than political. The Income-tax Act, 2025 came into force on 1 April 2026 and carried the block assessment regime across from the 1961 Act into a new set of section numbers. A block assessment needs a return, and until this notification there was no prescribed form under the new Rules for that return. Notification 97/2026 fills that gap, and it does so retrospectively: the amendment rules are deemed to have come into force on 1 April 2026, so the form is available for the entire first year of the new Act.
The legal plumbing is worth stating precisely, because the section numbers have all moved. The notification is issued in exercise of the powers conferred by Section 294 read with Section 533 of the Income-tax Act, 2025. Section 294 is the procedure for block assessment, which is the provision under which the Assessing Officer issues the notice calling for the return. Section 533 is the general power to make rules. The amendment itself operates on Rule 332 of the Income-tax Rules, 2026, substituting “Appendix III” with “Appendix III and Appendix IV”, and inserts the new Appendix IV in which Form ITR-BN sits.
Which Searches Does It Cover? The 1 April 2026 Cutover
This is the single most important applicability question, and it has a clean answer. The amendment rules apply to any search initiated under Section 247, or requisition made under Section 248, of the Income-tax Act, 2025, on or after 1 April 2026.
Two consequences follow, and CAs handling live matters should note both.
| Search or requisition date | Governing regime | Return form |
|---|---|---|
| On or after 1 April 2026 | Income-tax Act, 2025, Sections 247 and 248, block assessment under Sections 292 to 298 | Form ITR-BN, Appendix IV to the Income-tax Rules, 2026 |
| Before 1 April 2026 | Income-tax Act, 1961, the pre-existing block assessment machinery | The form applicable under the 1961 regime. ITR-BN does not apply. |
So a search carried out in, say, February 2026 does not migrate to ITR-BN merely because the assessment is being completed in the current year. The trigger is the date the search was initiated or the requisition made, not the date of the notice, the date of the return, or the date of the assessment order. If you are carrying matters that straddle the cutover, sort them by search date first.
The Block Period: How Many Years Are You Actually Reporting?
Block assessment is not an ordinary assessment for one year. It sweeps up a multi-year window and taxes the undisclosed income of that whole window in a single proceeding.
The block period comprises the six tax years immediately preceding the tax year in which the search was initiated or the requisition made, plus the tax year of the search itself, and where the search year is incomplete, the period of that year up to the date on which the last of the authorisations is executed. In practical terms a practitioner is reconciling roughly seven years of records in one return, and the form is built to demand exactly that.
Two related provisions in the Income-tax Act, 2025 do the substantive work and are worth reading alongside the form:
- Section 292, assessment of total undisclosed income as a result of search.
- Section 293, computation of total undisclosed income of the block period.
- Section 296, time-limit for completion of block assessment.
- Section 298, levy of interest and penalty in certain cases.
What Does Form ITR-BN Actually Ask For?
The form is structured in parts, and the structure tells you what the Department expects a taxpayer to be able to reconstruct. Based on the form as notified in Appendix IV and as reported in professional commentary on the notification, the parts run broadly as follows.
| Part | What it captures |
|---|---|
| Part A | General information. PAN, name, date of birth or incorporation, Aadhaar, address, residential status. Then the search-specific fields: date of initiation of search under Section 247 or date of requisition under Section 248, the date on which the last authorisation was deemed executed, the block period start and end dates, particulars of the notice issued under Section 294 including its DIN and date, the due date for filing, and the return-filing history for each of the preceding years in the block. |
| Part B | Computation of total income for the truncated part of the search year, head by head: salaries, house property, profits and gains of business or profession, capital gains and income from other sources. |
| Part C | Computation of undisclosed income for the block period, year by year, reconciling what was previously returned, what was previously assessed, and what is now being brought to tax as undisclosed. |
| Part D | The break-up. Part D-I disaggregates the undisclosed income head-wise. Part D-II requires item-wise disclosure across categories including money, bullion, jewellery, virtual digital assets, international transactions, and a residual “any other” bucket. |
| Part E | Tax computation. Tax at 60 per cent of the undisclosed income of the block period, plus applicable surcharge, plus 4 per cent Health and Education Cess, plus interest under Section 298. |
| Parts F to H | Tax payment particulars: self-assessment tax, advance tax, and TDS or TCS credits, with challan details and deductor information. |
| Verification | Signature with PAN, and Tax Return Preparer details where one has been engaged. |
The design point behind Part D-II
The item-wise disclosure schedule is the part practitioners should read first. It is not a formality. By forcing a taxpayer to classify undisclosed income against specific asset categories, including a dedicated line for virtual digital assets, the form converts a narrative dispute into a schedule that the Assessing Officer can test line by line. The inclusion of virtual digital assets as a named category is the clearest signal in the form of where the Department expects search cases to go over the next few years.
The 60 Per Cent Rate: What It Means in Practice
Undisclosed income of the block period is not taxed on the slab. It is charged at a flat 60 per cent, with surcharge and 4 per cent cess on top, and interest under Section 298 where applicable.
The practical arithmetic is unforgiving. There is no basic exemption limit applied against undisclosed income of the block period, and the ordinary deductions and set-offs that soften a normal assessment do not do the same work here. A rupee classified as undisclosed income of the block period costs materially more than a rupee of ordinary business income assessed in a regular assessment. That asymmetry is the whole point of the regime, and it is also why the classification fight in a block assessment is almost always more valuable than the quantum fight. Whether an amount is undisclosed income of the block period at all, or is instead income already recorded and assessable in a regular assessment, is the question worth the professional time.
Who Is Affected, and What Each Stakeholder Should Do
For businesses and promoters
Nothing here requires action unless and until a search or requisition happens. What it should change is your record-keeping horizon. A block assessment reaches back six tax years plus the search year, so the practical retention question is not “what does the law require me to keep” but “could I reconstruct seven years of books, bank trails, cash movements and asset acquisitions if I had to”. If the honest answer is no, that gap is the exposure, not the tax rate.
For CAs and tax practitioners
Three concrete things. First, diarise the cutover: any matter where the search was initiated on or after 1 April 2026 now has a prescribed form and you should not be improvising. Second, when a Section 294 notice lands, capture the DIN, the notice date and the stated due date immediately, because Part A of the form requires all three and a mismatch is an avoidable procedural argument. Third, build the Part C reconciliation from the earlier returns before you attempt Part D, not after; the year-wise reconciliation of returned income, assessed income and undisclosed income is what determines the number, and Part D is only the presentation of it.
For MSMEs and family businesses
The risk in this regime is rarely a hidden offshore structure. It is undocumented cash working capital, personal and business funds moving through the same accounts, family gold with no acquisition trail, and property bought partly in cash years ago. Those are precisely the items Part D-II asks about by name. Cleaning up the documentation trail on legitimate but poorly evidenced assets is worth more than any planning.
Compliance Checklist
- Confirm the date the search was initiated under Section 247, or the requisition made under Section 248. If it is before 1 April 2026, ITR-BN does not apply.
- Obtain and record the notice under Section 294, its DIN, its date, and the due date stated in it.
- Fix the block period: six tax years preceding the search year, plus the search year up to the date the last authorisation was executed.
- Pull the filing history for every year in the block: returns filed, dates, acknowledgement numbers, and assessment status.
- Reconstruct Part C year by year before drafting anything else.
- Classify every item in Part D-II by category, including virtual digital assets, and attach the evidence trail for each.
- Compute tax at 60 per cent plus surcharge plus 4 per cent cess and check interest under Section 298.
- Claim every TDS, TCS and advance tax credit across the block period in Parts F to H. These are routinely under-claimed in block returns.
- File within the time stated in the Section 294 notice. Do not treat the notice period as elastic.
Frequently Asked Questions
What is Form ITR-BN?
Form ITR-BN is the Income-tax Return for Block Assessment for Search and Seizure cases, notified by CBDT through Notification No. 97/2026 dated 24 July 2026 as part of the Income-tax (Third Amendment) Rules, 2026. It sits in the new Appendix IV to the Income-tax Rules, 2026 and is used to file the return of undisclosed income for a block period following a search or requisition.
Is filing ITR-BN voluntary?
No. It is not a form a taxpayer elects into. It becomes applicable when a search is initiated under Section 247 or a requisition is made under Section 248 on or after 1 April 2026, and the return is filed in response to a notice issued under Section 294.
My client was searched in January 2026. Do we file ITR-BN?
No. The amendment rules apply to searches initiated or requisitions made on or after 1 April 2026. A January 2026 search remains under the pre-existing regime and the form applicable to it. The test is the date the search was initiated, not the date of the assessment.
How many years does the block period cover?
The six tax years immediately preceding the tax year of the search, plus the tax year in which the search was initiated up to the date the last authorisation was executed. In practice that is a reconciliation across roughly seven years in a single return.
At what rate is undisclosed income of the block period taxed?
Form ITR-BN computes tax at 60 per cent of the undisclosed income of the block period, plus applicable surcharge and a 4 per cent Health and Education Cess, with interest under Section 298. There is no slab benefit and no basic exemption applied against this income.
Does ITR-BN replace the normal ITR for those years?
No. Block assessment runs alongside, not instead of, the regular assessment machinery. ITR-BN deals with the undisclosed income of the block period. Income already disclosed in the returns filed for the years in the block continues to be dealt with under the ordinary provisions, which is exactly why the Part C reconciliation between returned, assessed and undisclosed income is the heart of the form.
The Bottom Line
Notification 97/2026 is not a policy change and it does not widen anyone’s exposure. It is the machinery catching up with the Income-tax Act, 2025: a block assessment under the new Act now has a prescribed return form, and it applies from the moment the new Act took effect. The substantive shift for practitioners is in the form’s structure, not the law. Part C forces a year-by-year reconciliation and Part D-II forces asset-level classification, including of virtual digital assets. Both of those make a block assessment far harder to argue at the level of narrative and far more a question of documentation. Prepare accordingly, and do it before a search rather than after one.
Source and Verification Note
Section numbers under the Income-tax Act, 2025 cited in this article were individually verified before publication: Section 247 (Search and seizure), Section 248 (Powers to requisition), Section 292 (Assessment of total undisclosed income as a result of search), Section 293 (Computation of total undisclosed income of block period), Section 294 (Procedure for block assessment), Section 296 (Time-limit for completion of block assessment), Section 298 (Levy of interest and penalty in certain cases) and Section 533 (Power to make rules). Retrieved 7 August 2026.
Deliberately not asserted: the gazette S.O. or G.S.R. number of Notification 97/2026 could not be confirmed against the gazette and is therefore not stated. The incometaxindia.gov.in notification document was not directly retrievable on this date. The detailed part-by-part field list of Form ITR-BN, and the 60 per cent rate as computed in Part E, are stated on the basis of the notified form as reported in professional commentary rather than from a retrieved copy of Appendix IV, and should be confirmed against the bare form before it is filled in a live matter. The rate-charging section under the Income-tax Act, 2025 is referred to at concept level and its section number is not asserted.
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- New TDS and TCS Return Forms From FY 2026-27
- Cost Inflation Index FY 2026-27 Notified at 384
Facing a Search Assessment or a Section 294 Notice?
Block assessments are won or lost on classification and documentation, and the work that matters usually needs to happen in the first few weeks. If you are dealing with a live search matter, or you want to understand where a business’s reconstruction gaps sit before anything happens, schedule a strategy session and we will work through the specifics with you.
Disclaimer: This article is published by Tax Update India for general information and professional awareness. It is not tax, legal or investment advice and does not create an adviser-client relationship. It is based on CBDT Notification No. 97/2026 dated 24 July 2026 and the Income-tax Act, 2025, as understood at the date of publication from official and reputable public sources. Section numbers refer to the Income-tax Act, 2025, in force from 1 April 2026. The exact text of the notification and of Form ITR-BN in Appendix IV must be verified against the primary source before being relied upon in any specific case. Readers should obtain advice on their own facts before acting.
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